Airlines caution Israel-Hamas war clouds travel outlook

Two of Europe’s biggest airline groups cautioned that the war between Israel and Hamas is clouding the outlook for travel in the Middle East, as customers start to avoid nearby destinations. British Airways parent IAG and Air France-KLM each reported record third-quarter operating profit on Friday, driven by booming summer demand, especially between Europe and North America. But the CEOs of both carriers signaled a careful stance going forward. While most airlines have halted flights to Israel — a small part of most major carriers’ revenue — some travelers are also staying away from nearby countries like Egypt and Oman. “We are seeing some slight reduction in demand to some of the other destinations we serve around Israel,” CEO Ben Smith said on a conference call after reporting results that missed analysts’ estimates. The company said it hasn’t yet seen any material impact from the war. IAG CEO Luis Gallego said the group, which also includes Aer Lingus and Iberia, would maintain its fourth-quarter forecast as it monitors developments. The company is seeing “limited revenue impact” on flights to Egypt and Oman. “We’re very mindful of the geopolitical and macroeconomic uncertainty, in particular the events happening in the Middle East,” Gallego said on an earnings call. Airlines have benefited from a bumper summer as travel got close to pre-Covid levels and the last remaining travel restrictions were lifted. It’s allowed companies like IAG and Air France-KLM to mend balance sheets damaged during the pandemic and set their sights on consolidation. But the rest of the year looks more challenging, with cost of living pressures in key markets, higher interest rates and growing geopolitical difficulties, as the Israel-Gaza conflict adds to the continued closure of airspace over Ukraine.s<br/>